Buyers return despite a steep drop in buying power, reveals Zoopla

Buyers are returning to the housing market after a quiet summer, with home searches up 7% year-on year, it has been revealed.

The rebound has been seen across the board nationally, according to Zoopla, which carried out the research.

However, it warned that buyers have seen a 9% drop in their buying power due to the increase cost of home loans.

Home searches online

Searches have increased across every region and country for the first time since August last year.

Richard Donnell, Executive Director of Zoopla, (pictured), says: “This is a nationwide trend and the first time searches for homes are up across Britain this year.”

The strongest pick-up is in the South East, which is up 8.9%, and the east of England at 8.5%. The north west saw the smallest increase at 0.7%.

“This is a nationwide trend and the first time searches for homes are up across Britain this year.”

It comes despite a significant squeeze on affordability. Average five-year fixed mortgage rates have risen from below 4% in January to around 4.8% today.

It means that a borrower who could previously afford a £200,000 mortgage can now only borrow around £182,000 for the same monthly payment, Zoopla said.

The portal suggested that to offset this and keep repayments unchanged, an average buyer would need to add £18,200 to their deposit.

In London, the figure is almost double at £35,000, while buyers in the North East would need an extra £10,200.

Sales agreed down

At the same time, Zoopla went on to admit that sales agreed are down 6% year-on-year.

The number of homes for sale is 5% higher than a year ago, providing buyers with plenty of choice.

Donnell continues: “Many buyers have taken a ‘wait and see’ approach over the summer months in response to higher borrowing costs and political uncertainty.

“The low point for activity was mid July around the time of the World Cup final. Since then we have seen a steady increase in the number of people searching for a home, assessing their options ahead of the post holiday rebound in sales market activity.

Mortgage rates

He adds: “Average mortgage rates have stabilised but remain closer to 5% than 4% meaning affordability remains an important factor for many home buyers choosing their next home.”

“Buyers have plenty of choice this autumn and will be able to make competitive bids for homes. Motivated sellers need to price carefully to attract interest and bids and seek the advice of local agents for the likely levels of demand and interest in their home as market conditions vary widely across the country.”

Industry reaction

Tom Bill, head of UK residential research at Knight Frank, says: “The autumn bounce in housing market activity should be more noticeable than it was in the spring, but that’s not a particularly high bar.

“Many mortgage rates are a percentage point higher than they were before the Middle East conflict began earlier this year, but rates appear to have stabilised. Another important factor is that the Budget rumour mill is quieter than last summer, which has encouraged people to act. If tax speculation increases from September, that could sap momentum from the market.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “We are starting to see holiday returnees slowly drifting back but the market is not what it was just a few months ago.

“On the ground, modest rises in mortgage costs have reinforced the buyer’s hand and are resulting in lower offers, particularly for flats, many of which have remained unsold for some time. On the other hand, only relatively few sellers are recognising the new realities and negotiating as hard as they can to try to agree terms at what they regard as realistic.

“We know too, that listings will increase over the next few weeks bearing in mind a recent rise in appraisals which will further strengthen buying power.

“Looking forward, we don’t anticipate much change as speculation about potential Budget tax increases intensifies.”

Nathan Emerson, Chief Executive of Propertymark, says: “These figures suggest buyers are beginning to re-engage with the housing market after a quieter summer, with searches up across every region. But renewed interest should not be mistaken for a full recovery in transactions just yet.

“Affordability remains the key constraint. Higher mortgage rates are reducing buying power, while the additional £18,200 deposit needed to maintain repayments highlights the particular challenge facing first-time buyers.

“More homes available for sale is positive, giving buyers greater choice and helping keep price growth in check. But the regional picture remains mixed, reinforcing that the housing market is not one-size-fits-all.

“Local expertise will be crucial this autumn, helping buyers understand what they can realistically afford and ensuring sellers price their homes appropriately. The return of demand is encouraging, but affordability remains the biggest barrier to a sustainable recovery.”

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